Victoria Company reports the following operating results for the month of April. VICTORIA COMPANY...
Question:
Victoria Company reports the following operating results for the month of April.
| VICTORIA COMPANY | ||
|---|---|---|
| CVP Income Statement | ||
| For the Month Ended April 30, 2017 | ||
| Total | Per Unit | |
| Sales (9,100 units) | $436,800 | $48 |
| Variable costs | 240,240 | 26.40 |
| Contribution margin | 196,560 | $21.60 |
| Fixed expenses | 164,160 | |
| Net income | $32,400 | |
Management is considering the following course of action to increase net income. Reduce the selling price by 10%, with no changes to unit variable costs or fixed costs. Management is confident that this change will increase unit sales by 20%.
Using the contribution margin technique, compute the break-even point in units and dollars and margin of safety in dollars.
(a) Assuming no changes to selling price or costs.
(b) Assuming changes to sales price and volume desired above.
Break-even Point and Margin of Safety:
The break-even point in units is the number of units a company has to sell for their income to be zero. The break-even point in dollars is the number of sales in dollars that a company has to make for their income to be zero. The margin of safety is the difference between a company's total sales dollars and their break-even point in dollars.
Answer and Explanation: 1
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(a) No changes to selling price or units
- Break-even point in units = Total fixed costs / Contribution margin per unit
- Break-even point in units =...
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